ECON 1116 Chapter Notes - Chapter 6: Tax Wedge, Tax Incidence, W. M. Keck Observatory

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ochredeer739

24 Aug 2016

School

Northeastern University

Department

Economics

Course

ECON 1116

Professor

Niam Nehan

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Document Summary

Government says you cannot charge more than a maximum price d. ii. Non-binding: if the maximum price is above the equilibrium price d. ii. 1. Eg: you cannot charge more than for a product d. ii. 1. a. If equilibrium price is the regulation by government does not affect the market d. ii. 1. b. Binding: if the maximum price is below the equilibrium price d. iii. 1. Example d. iii. 1. a. if something causes supply to decrease and shift to the left new equilibrium price becomes d. iii. 1. b. So market price is still even though the new equilibrium price is : price ceiling examples e. i. Government imposed a price ceiling of p1 (above the equilibrium) e. i. 2. Countries decided to decrease the supply supply curve shifts to the left new equilibrium price (p2) e. i. 3. P2 > p1 government regulation causes price to stay at p1 e. i. 3. a. So now there was more quantity demanded than e. i. 3. b. e. i. 3. c. supplied at the price p1.

Related Questions

A recent study found that the demand and supply schedules for flying disks are as follows:

Price	Quantity Demanded	Quantity Supplied
(Dollars per disk)	(Millions of disks)	(Millions of disks)
11	1	15
10	2	12
9	4	9
8	6	6
7	8	3
6	10	1

Complete the first row of the following table by indicating the equilibrium price and the equilibrium quantity of flying disks in the absence of any price controls.

Scenario	Market Price	Market Quantity	Binding or Not Binding
Scenario	(Dollars per disk)	(Millions of disks)	Binding or Not Binding
No Price Control			N/A
Price Floor
Price Ceiling

Flying disk manufacturers persuade the government that flying disk production improves scientists' understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $2 above the equilibrium price.

Complete the second row of the previous table by indicating the new price and quantity of flying disks when Congress imposes a price floor $2 above the equilibrium price. Then indicate whether the price floor is binding or not binding.

Irate college students march on Washington and demand a reduction in the price of flying disks. An even more concerned Congress votes to repeal the price floor and impose a price ceiling $3 below the former price floor.

Complete the final row of the previous table by indicating the new price and quantity of flying disks when Congress imposes a price ceiling $3 below the former price floor. Then indicate whether the price ceiling is binding or not binding.

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33) If the government imposes a maximum rent for housing that is above the equilibrium price, then you predict that A) the law will have no effect in the market for housing. B) the supply curve for housing shifts leftward. C) the demand curve for housing shifts rightward. D) the law will generate a shortage of housing. E) the law will create a surplus of housing.

26) If the government imposes a maximum rent for housing that is above the equilibrium price, then you predict that A) the supply curve for housing shifts leftward. B) the law will generate a shortage of housing. C) the law will create a surplus of housing D) the law will have no effect in the market for housing. E) the demand curve for housing shifts rightward.

ECON 1116 Chapter Notes - Chapter 6: Tax Wedge, Tax Incidence, W. M. Keck Observatory

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